Federal health cuts will total $36 billion over decade: Premiers

The premiers, shown at one of their meetings this past week in Nova Scotia, say the new health accord will hurt the public system.

HALIFAX — Canada's premiers say the new federal health accord will gut nearly $36 billion in funding to the provinces over the 10-year deal and will erode public health services to all Canadians.

A new report released Friday by a working group of provincial and territorial finance ministers, and chaired by Manitoba Premier Greg Selinger, that examined the proposed federal health funding says the new accord announced by Ottawa last winter will financially wallop cash-strapped provinces already struggling to pay for health care.

The report — unveiled on the final day of the Council of the Federation meetings in Halifax — estimates the federal government's Canada Health Transfer will be reduced by nearly $36 billion over the course of the 10-year deal, which runs from 2014-15 to 2023-24, compared to the agreement currently in place.

The federal government's share of health costs will also drop to less than 20 per cent, compared to 50 per cent years ago, says the report.

"We remain very committed to the notion of co-operative federalism where there ought to be discussions of these matters before decisions are taken, because it does have a big impact on Canadians," Selinger told reporters.

"Those resources will mean less money available for nurses and doctors and health care where people live in communities all across the country."

Nova Scotia Premier Darrell Dexter, current chairman of the Council of the Federation and host of this year's meeting, said "the facts are pretty simple" — provinces need more financial support from the federal government to deliver important programs and services to Canadians.

"If you were to look at your paycheques, two-thirds of the tax that you pay goes to the federal government and yet the provinces deliver 80 per cent of the services. That clearly is an imbalance," Dexter said.

Finance Minister Jim Flaherty announced in December a 10-year health funding arrangement with the provinces that takes effect in 2014 and will maintain the annual increase in the transfers at six per cent until 2016-17.

But after that, health-care funding increases will be tied to the rate of the country's economic growth, including inflation — roughly four per cent — and will never fall below three per cent. Ottawa estimates annual federal health funding will still reach $38 billion by 2018-19.

The Canada Health Transfer funding will also move to an equal per-capita cash transfer, which is being welcomed by some provinces like Alberta but assailed by others.

Many economists have said a six-per-cent annual increase in health spending is unsustainable for governments over the long term, while some provinces have praised the new federal health accord for providing long-term stability on medical funding.

Flaherty said Friday that federal health transfers over the next five years (growing at six per cent annually) will actually increase faster than projected provincial health spending (which is around four per cent). Furthermore, federal health transfers to the provinces increased nearly 35 per cent between 2006-07 and 2011-12, he said.

"All governments in Canada must recognize long-term deficit spending creates a heavy debt burden that limits a government's ability to support economic growth and protect social programs," Flaherty said in a statement.

"Going forward, we will continue to increase transfers to the provinces and territories so that they can deliver critical services to Canadians."

Of the $36 billion in reduced health funding the premiers say they'll receive, $25 billion is from the move to the economic growth escalator compared to the current six-per-cent annual increase.

The remaining $11 billion would come from what premiers say is reduced financial protection measures for provinces to ensure no jurisdiction is worse off once the CHT moves to an equal per-capita cash allocation in 2014-15.

In the shorter term, between 2014-15 and 2018-19, the premiers estimate they will receive about $23 billion less in federal transfers to the provinces compared to current arrangements.

Over those five years, that includes a $7-billion cut to the Canada Health Transfer and $16 billion less in equalization payments that support social programs, partly due to the extension of "caps" on equalization funding that will see it grow in line with GDP until at least 2018-19, the report says.

Selinger, Alberta Premier Alison Redford and New Brunswick's David Alward will chair a meeting of provincial and territorial finance ministers in fall 2012 to examine options that ensure all provinces are able to provide reasonably comparable levels of public services and that no province is worse off.

Federal Parliamentary Budget Officer Kevin Page has previously estimated the smaller annual increases in federal health transfers will cost the provinces approximately $31 billion over the life of the new 10-year deal.

Total federal transfers to the provinces — including the CHT, the Canada Social Transfer (for post-secondary education and social services) and equalization — is expected to reach $60 billion in 2012-13, including nearly $29 billion for health alone.

The Canada Social Transfer will continue to increase at three per cent annually. However, premiers note the CST will grow at a slower rate than health funding, meaning federal cash for post-secondary education and social services will comprise a progressively smaller proportion of overall federal transfers.